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Lawrence Nga, The Motley Fool
Mon, June 29, 2026 astatine 5:03 AM CDT 5 min read
Micron (NASDAQ: MU) banal has delivered bonzer returns implicit the past twelvemonth and a half. After a rally of much than 1,200% since the commencement of 2025, galore investors volition people presume the casual wealth has already been made connected this stock. That whitethorn beryllium true.
But investors should retrieve thing important: A banal does not go a atrocious concern simply due to the fact that it has gone up sharply successful price. The much applicable question is not astir however overmuch Micron banal has risen. It's astir whether Micron tin support increasing its profits. If the reply is yes, the banal could inactive person country to run.
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The banal doesn't request to get much costly
Many investors presume a banal tin lone emergence importantly if investors go adjacent much excited astir it. That isn't ever the case.
Imagine a institution earns $10 cardinal successful yearly profits and investors worth the concern astatine $200 billion. That would springiness it a price-to-earnings ratio of 20. If profits yet emergence to $20 cardinal and the marketplace keeps putting that aforesaid valuation connected the company, its marketplace headdress would emergence to $400 billion.
That hypothetical banal would person doubled adjacent though investors had not go immoderate much optimistic astir the business. Rather, the concern would person go much invaluable due to the fact that its profits rose.
Therein lies the basal bull lawsuit for Micron. If the institution tin proceed to turn its profits, the banal tin support rising adjacent if the valuation remains unchanged.
The bull lawsuit for wherefore profits could proceed to turn
Micron sits astatine the halfway of 1 of the largest exertion spending booms successful decades.
Companies astir the satellite are investing heavy successful artificial quality infrastructure. The information centers they are gathering and equipping request capacious quantities of precocious representation to efficaciously grip the workloads progressive successful grooming and moving progressively almighty AI models. That surging request has near the full representation manufacture abbreviated connected supply, which has helped Micron and its peers turn gross and profits.
In the latest quarter, Micron's gross much than quadrupled twelvemonth implicit twelvemonth from $9.3 cardinal to $41.5 billion, portion operating nett surged much than tenfold from $2.2 cardinal to $33.3 billion.
At the aforesaid time, Micron is selling much of its astir precocious representation products -- specified arsenic high-bandwidth representation -- for AI applications. That volition assistance the institution make adjacent greater profits from each dollar of revenue.
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